Monday, December 22, 2008

Thomas Sowell on Postponing Reality for the Car Industry

Thomas Sowell has an excellent article about the future of the car industry. He starts by drawing a paralel to the demise of the horse industry a hundred years ago, when the automobile became the main mean of transportation. Yes, plenty of jobs were lost, people supplying oats, saddles, horse shoes and buggies, but it was not the end of the world. It's what Schumpeter called "creative destruction", replacing non-efficient business with newer, modernized ones.

Of course, the end of thousands of years of horse business is not what's happening now, because there's no replacement for cars on the horizon. People are going to need cars in increased numbers, and if they don't buy them from GM or Chrysler, they'll buy from Toyota or Honda. That's why Toyota is building factories like crazy, because eventually someone will have to step in and supply the missing cars. As for the millions of jobs that are going to fall like dominoes: Dealerships will sell Hondas as well as they sold Chevys. And Toyotas still run on the exact same number of tires as a Buick. So again, it won't be the end of the world.